Middle Market Case Study:
Cashflow Management

CASH POSITION CLARITY FOR A START-UP FIRM

CHALLENGE:
Managing Early, Intense Growth

During CMF’s engagement as the interim CFO for a one-year-old startup enterprise, sales had already started to grow to more than $2M per month.

This intense growth was welcomed by the founders, but was beginning to put a strain on the company’s infrastructure and cash flows.

Management approached CMF for assistance in achieving enhanced cash flow forecasting capabilities and visibility to cash position.

SOLUTION:
A Three-Pronged Cashflow Approach

CMF applied its three-pronged approach to cash flow management:

1. Identifying sources and uses of cash by interviewing management and reviewing financial records, and documenting cash movements to be modeled

2. Modeling cash in a tailored manner, integrating information from sales, production, operations, and other non-financial groups

3. Implementing cross-functional cash flow projection program with automation, judgment, and multiple iterations

OUTCOME:
Critical Spending Visibility and Adjustments

• In three weeks, CMF implemented its cash flow management product and devised a comprehensive 13-week cash flow model that was reviewed with management. We found that the company would run out of money within two and a half months if spending was not adjusted.

• The company’s inability to finance its working capital needs put it at risk of a liquidity crisis. In response, the company reduced marketing expenses and negotiated with certain vendors to defer payments for several months until the company’s cash position improved.